Benefits Of Life Insurance For People With Home Loan

Your house is your safe haven. It is a place that is full of hope, love, and cherished memories. Each room in a home carries its own unique story, rich with memories and experiences. For many, these stories begin with the purchase of a home, often made possible through a home loan. But remember that a home loan is a long-term commitment. What if something unforeseen happens to you? In this situation, even if you are not there to provide for your family, you should have a robust safety shield in place.

This is where you will need life insurance as your family's safety net to ensure they won't struggle to pay for it.

But how exactly do the benefits of life insurance help someone with a home loan? How can you make the most of this protection?

Relax! We have every question answered for you!

Continue reading below to learn more about these topics and the peace of mind that comes with having life insurance.

Benefits Of Life Insurance For People With Home Loans

Here are a few reasons why life insurance is essential for homeowners with a mortgage -

Ensuring Your Family’s Stability & Protecting Their Home

The assurance that life insurance provides by safeguarding your family's financial future is one of the core benefits of life insurance for homeowners. Life insurance can pay off your outstanding mortgage commitment, reducing the possibility of foreclosure, which occurs when a lender seizes ownership of a property. This happens because the owner is not able to make mortgage payments. Thus, the family can stay in the house stress-free, maintaining their way of life and safeguarding their investment to ensure financial stability during tough times.

Easing The Burden Of EMI Payments

Your home loan's Equated Monthly Instalments (EMIs) can be covered by life insurance, providing much-needed financial relief. This implies that your family will be able to continue paying mortgage payments without having to worry about obtaining more money in case the breadwinner passes away, reiterating the core benefit of the policy.

Customisable And Budget-Friendly Premiums

The benefit of flexible and inexpensive premium payment alternatives offered by life insurance plans makes it simpler to find a plan that suits your budget. You can make adjustments to your payments to fit your cash flow requirements and financial status by selecting from a variety of payment frequencies and modes.

Comprehensive Financial Safety

You can give your dear ones a safety net by matching your life insurance policy with your mortgage, relieving them of the financial stress of loan repayment in the event of your death. This strategic method provides complete financial security and peace of mind, averting the double tragedy of losing both the family home and a family member.

Maximising Tax Savings

For homeowners, life insurance is even more advantageous because it provides significant tax benefits*. You may deduct the yearly premiums you pay for your policy under Section 80C of the Income Tax Act of 1961. As a result, you safeguard your family's future while saving money. As long as certain requirements are met, claim payout from the life insurance policy is tax-exempt under Section 10(10D)** of Income-tax Act,1961, assuring your beneficiaries receive the full benefits of life insurance without having to pay taxes. You may also qualify for additional Section 80D deductions if your policy includes health-related riders, which would further increase your tax savings.

Type Of Home Loan Insurance Plans

In India, there are two main types of home loan insurance plans to consider -

1. Level Cover Plan

a) Coverage: With this plan, the insurance coverage stays consistent throughout the duration of the loan. b) Pros: It offers a stable level of protection, ensuring your coverage doesn’t fluctuate over time.

2. Decreasing Cover Plan

a) Coverage: Here, the insurance coverage gradually decreases in line with the diminishing outstanding loan amount. b) Pros: This plan usually comes with a lower premium since the coverage decreases as the loan balance reduces.

Please Note: These are the main categories of house loan insurance plans; however, each of these has subcategories and extra benefits. It's critical to evaluate several plans in order to select one that fits both your risk tolerance and financial circumstances.

Although standard life insurance policies can also be used to cover home loans, it may be worthwhile to look at alternatives like term insurance or mortgage redemption insurance plans made expressly for home loans. Speak with a financial counsellor to go over your needs and objectives in depth so that you can make an informed decision.

How Does Life Insurance Work For Homeowners With Loans?

Let’s break it down -

Selecting The Right Plan

First, determine how much coverage you require by taking into account any other financial obligations and your outstanding loan sum. Term insurance, for example, can be the best choice if you're searching for affordable solutions. On the contrary, mortgage protection insurance can be the best option if you're looking for coverage that is specifically catered to your mortgage.

Managing Premium Payments

Next, you will have to make recurring payments in accordance with the plan you have selected. These can be scheduled monthly, quarterly, semi-annually, or annually.

In Case of Fatality

The death benefit is payable in the tragic event that the insured passes away. This is how it works -

• Life Insurance: Your beneficiaries will receive the death benefit if you have a life insurance policy. This sum can be used to pay down the mortgage, particularly if you choose Mortgage With Protection (MWP). For instance, a life insurance policy obtained in accordance with the Married Women's Property Act guarantees# that your spouse will get the claim money directly, protecting it from any unpaid debts or obligations.

• Mortgage Protection Insurance: In contrast, the payout under this type of insurance may go directly to the estate or the lender to cover the outstanding loan amount.

Filing A Claim

The beneficiaries or the estate will have to submit a claim to the insurance company. The insurance company will pay out the compensation after the claim has been reviewed and approved. This payment settles the mortgage, or if it is intended for the insured's estate, it may be placed aside for mortgage settlement at a later date.

By purchasing the appropriate life insurance, homeowners can ensure that their family is financially protected.

What Are Some Advantages Of Life Insurance For Home Loans?

There are several important benefits that you can get when you combine life insurance with your home loan -

Financial Safety Net for Your Loved Ones:

If you have a life insurance policy, the death benefit can be used to settle the outstanding amount on your house loan. By doing this, you may protect your family from financial stress and provide them with stability.

Ultimate Peace Of Mind:

You can rest easy knowing that your dear ones are financially stable in case of an unexpected event by purchasing life insurance.

Preventing Foreclosure On Your House:

Life insurance can be vital for safeguarding your family's house against foreclosure. By making sure the house loan is paid off in the unlikely scenario of your demise, it can lower the likelihood of foreclosure.

Versatile Options For Coverage:

Life insurance offers a great deal of versatility. You have the choice to create a plan that best suits your needs and those of your family by customising the amount of coverage, selecting the policy term, and choosing premium payment alternatives.

Extra Advantages:

Some life insurance policies provide extra benefits like disability and accidental death benefits or coverage for severe illnesses.

Tax Benefits*:

The possibility of reducing taxes is yet another fantastic benefit. Under Section 80C of the Income Tax Act, 1961 yearly life insurance premiums may be tax-deductible. In addition, up to a specific amount, premiums for riders with health-related expenses may be claimed under Section 80D.

Let’s Wrap It Up!

Life insurance protects your dear ones from the financial strain of a house loan, just as Harry Potter's invisibility cloak would keep him unharmed. Consider life insurance as your enchanted defence, promising that your house will always be a secure refuge, even in the event that life presents unforeseen difficulties.